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Growth Management Plan
Background
on the GMP:
*** In May,
the Holstein Association USA, which boasts 30,000 members nationwide, unveiled
the "Dairy Price Stabilization Program," a concept almost identical to the
Growth Management Plan. MPC is supporting the Holstein Association in
promoting the Dairy Price Stabilization Program, and is working with them to
build a national coalition of support. For a summary of the DPSP and a
list of supporters, please visit:
http://www.holsteinusa.com/association/dairyprice.html
From MPC's
Newsletter:
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Are Dr. Sexton's Arguments Credible?
(September 11, 2009)
It’s been a more than a month since I’ve written in this newsletter with any
detail about the Dairy Price Stabilization Plan. However, behind the scenes
there has been much activity.
The U.S. dairy industry is in the midst of a national debate. Everyone – from
producers to processors – recognizes that the growing milk price volatility
that has become commonplace in our industry is extremely harmful. However,
when it comes to potential solutions, there is a battle of ideas and
ideologies circulating.
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Cornell University Report Highlights the Continuing Threat of
Milk Price Volatility (May 29, 2009)
This
week, Cornell University’s Program on Dairy Markets and Policy released the full
report on their analysis of the Growth Management Plan. Drs. Mark Stephenson
and Chuck Nicholson included an expansive discussion of milk price volatility
and how it has gotten dramatically worse with each boom/bust cycle. The readers
of this newsletter have heard it before, but it bears repeating: volatility
is undoubtedly the single largest threat to this industry.
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A Big Week for the Growth Management Plan
(May 15, 2009)
This week brought some very big developments in
our continuing efforts to build national support for a program like the Growth
Management Plan (GMP). \ |
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Major Development for the Growth Management Plan
(May 1, 2009)
This
week, the Holstein Association USA, which boasts 30,000 members nationwide,
unveiled the “Dairy Price Stabilization Program.” This program is virtually
identical to the Growth Management Plan (GMP), which readers of this newsletter
have been hearing about for quite some time (and for those that haven’t, I
would encourage you to check out
http://www.milkproducerscouncil.org/q&a_gmp.htm). Like the GMP, the
“Dairy Price Stabilization Program” would create a tangible financial incentive
for dairies to manage the amount of milk they produce, thereby keeping a better
balance of supply and demand.
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Cornell University Releases Updated Analysis
of the Growth Management Plan
(February 20, 2009)
This week, the Cornell University Program on
Dairy Markets and Policy (CPDMP) released an updated economic analysis of the
Growth Management Plan (GMP). The analysis was done by Drs. Mark
Stephenson and Chuck Nicholson.
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Was This Wreck Predictable? You Be The
Judge (January 16, 2009)
Almost two years ago, on April 27,
2007, Geoffrey Vanden Heuvel published an article in this newsletter entitled,
“Staying Profitable – An Idea.” The article opened with the following
introduction:
“The dairy industry has gotten into a Boom and
Bust cycle, which is getting increasingly violent with every passing turn. We
had a downturn in the year 2000 and recovered in 2001. We had a downturn in
2003, that was, at least for me, twice as severe as the year 2000 downturn. We
recovered in 2004/05 and went into another downturn in 2006, which we are just
starting to recover from in 2007. The approximately 16 months of downturn in ‘06
and early ‘07 has been twice again as severe in terms of equity lost as was the
2003 downturn. Realistically we are probably looking at about 12 - 24 months of
prosperity before we go back into the soup again. If nothing changes it is
likely that the 2009 downturn will be horrific.” (Geoffrey Vanden Heuvel,
04/27/2007) |
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More Comment on "The Magic of Pooling",
By Geoffrey Vanden Heuvel, MPC Vice-President (November 28, 2008)
Syp Vander Dussen, in his outstanding articles
the last couple of weeks, explained the “magic of pooling” concept. He wrote,
“If I produce one extra load of milk, which of course will go to powder (and
possibly to the CCC), it will have a value of less than $10 to the pool, but I
will receive a blend value of approximately $16.00 cwt for that load. But
remember, the income to the pool bucket is about $10.00! That $6.00 loss is
shared by all! Stated in again another way, it is in the best interest of every
producer to produce as much milk as he can, always, because the lower value for
that excess product is borne by everyone.”
What Syp is pointing out is the fatal flaw in our
milk pricing regulation: the price risk associated with increased production is
not borne directly by the person making the production increase; it is
transferred to the group at large. Basic economics tells us that supply and
demand for any product is kept in balance by each individual participant’s
calculation of risk verses reward. The “magic of pooling” transfers the risk to
the entire group and the individual is left with the “reward.” Because of this
reality, it is perfectly rational for each individual producer to grow
production indiscriminately, while at the same time it is obviously irrational
for dairy farmers collectively to produce more milk than can be profitably
marketed. |
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My View on Milk Production Increases, By Sybrand Vander Dussen, MPC President
(November 14, 2008)
The dairy industry in California continues in its
addiction of over-production of milk. Dairy producers seem to have only one
clear focus; produce more milk. As costs go up, as milk prices decline, we
produce more milk. As coops battle to place milk and milk products, we produce
more milk. With 3x milking, rBST, advancing genetics, gender-specific semen, we
produce more milk.
In a perfect world, where the milk we supply and
the demand for those products remained somewhat in balance, this would be a
strong sign of a vibrant and healthy industry. But the reality is, dairymen
produce in an unrestrained fashion with no consideration of demand, leaving the
industry in a perpetual state of overproduction which causes a myriad of
problems, all of which should be unnecessary.
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